California's Strategy: Be More Like Texas

By Derek Thompson

When we last looked at California's $26 billion deficit, I entertained the idea that the future of the America's states would look less like California's lush canopy of government spending, and more like Texas' harsher flatland of lean government services. Today, the New York Times reports that Gov. Arnold Schwarzenegger is very close to budget deal. What does the future of California look like? It certainly looks a lot more like Texas.

From the Times:

Details emerging from the talks suggested that the deal would require
extraordinarily deep cuts to school systems and local governments, and,
while far smaller than the governor threatened a month ago, substantial
cuts to health care and other social services.

Gov. Schwarzenegger and the state assembly are within millions, not
billions, of dollars of reaching a deal, according to the article. The
result will likely include a lot of social services cuts -- a waiting
list for children's health care, Medicaid payments will be
cut to their legal bare bones, some family welfare benefits could be
scrapped, and so on -- and exactly zero tax increases.

The low-tax, low-services model that Texas has engendered in its state
laboratory certainly has its benefits. As the Economist reported, Texas
is the most popular state for Fortune 500 companies, and it receives
top-notch business-friendly ratings. But, again, the other side having
the lowest tax revenue raised per capita is that you have lowest amount of
money to spend on services. Texas ranks last or next to last in the
following categories:

Percentage of population with health insurance Source 50-1
Percentage of high school graduates age 25 and over Source 50-2
[Percentage] of insured low-income children Source 50-3
Per capita spending on state arts agencies Source 49-2
Per capita spending on water quality Source 49-4
Amount of monthly Women, Infants, and Children (WIC) benefits paid Source 49-5

I don't know that California has a choice here. Not only is raising taxes
political suicide in the state, but it's also practically stupid to do
in the midst of a recession. So if you're not going to cut incoming
revenue, you have to limit outgoing spending -- to the tune of billions
of dollars, and to the detriment of education and social services. The California model is, indeed, fading, and the Lone Star state's philosophy is getting some company.